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CEKA 1X capital paid...extremely cheap
🎯 🌴 📈 Rp6,672
Last 12-month cashflow +Rp204bn ⬇️

October 29th, 2020
​⏰ 1 minute read

Watch the explainer ⬇️

Sales
Sales growth was back to a positive +18% from a year ago in the 3Q after -6% in the 2Q. At Rp870bn, sales were 12% above our forecast. Palm oil was up +55%, palm kernel -40%. This is the third of four positive growth quarters & we think sales are growing again. We predict +16% this next 12 months, Rp3.94tn.

Cashflow
With higher sales, cashflow was back to a surprisingly positive Rp92bn excluding working capital (but working capital was negative). This is much higher compared to our forecast of Rp42bn. Investment spending has increased a bit to average Rp8bn. We use that which with our sales forecast gives an average predicted quarterly free cashflow of Rp53bn for this next 12 months.

Sales recovery materializing, cash strong, cheap at only 1X capital paid, much higher target price...

Data file & model
Balance sheet
Because of positive cashflow, the balance sheet turned to net cash from net debt in the first quarter last year. Net cash was still at Rp406bn in the 3Q even after this year’s dividend payout. With our positive cashflow forecast & assuming a higher dividend payment of Rp110bn, net debt will be still higher at Rp508bn in 12 months time.

Profit
Net profit was up by +23% from last year in the 3Q at Rp48bn, a bounce back from Rp1bn in the 2Q. The cash cost ratio of net profit add back depreciation minus sales as a % of sales was the same as last year 94%. We use 94% to predict the next 12 months profit will be Rp219bn, +9.9%.

Value
CEKA has been paying out capital in the last 5 years, Rp892bn s cumulative as of the 3Q, almost 1X the market value of Rp1,035bn. That’s 0.26x sales, 0.69x assets, 0.8x equity with a 16.3% profitability & forecast 11% yield. Our cashflow forecast is Rp212bn. At 1.6% with a large 0.3x adjustment, gives a much higher target price of Rp6,672.
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